You are correct. I can see this model working out with businesses like Costco, who loses money on their legendary $7 chicken and $1.50 hot dog, but ends up earning much more thanks to memberships and reasonable prices. Similarly, some all you can eat restaurants also profit thanks to the AYCE model. I would expect a huge restaurant like Red Lobster to employ proper financial analysts and risk managers. But nope.

True, many businesses fail by being over leveraged. Red Lobster gambled and lost.